Do Taxes Affect Pre-Tax Income Inequality? Evidence from 100 Years of U.S. State Tax Policies
We study how U.S. state taxes have affected pre-tax income inequality during the last century (1917-2018), using data on state tax rates (including personal income, corporate income, and sales tax rates) and state top income shares (and other inequality measures). The long panel nature of our data allows us to study the effects of individual and corporate income tax adoptions, tax cancellations, and tax changes on pre-tax income inequality, and assess both immediate and long-term relationships.